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Approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated October 26, 2011 N 60/8 |
REGULATIONS
on transactions carried out by microfinance organizations and credit unions in accordance with Islamic principles of banking and financing
(As amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12, February 10, 2016 No. 7/2, December 21, 2016 No. 49/8, May 31, 2017 No. 21/10, March 28, 2018 No. 2018 -P-12/10-6, August 21, 2019 No. 2019-P-33/43-8, April 22, 2020 No. 2020-P-33/24-3)
The preamble has become invalid in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10
I. General provisions
1. The purpose of this Regulation is to establish the procedure for the implementation by microfinance organizations, including microfinance organizations with an "Islamic window" and credit unions of the Kyrgyz Republic (hereinafter referred to as FCOs), certain types of operations that comply with the Islamic principles of banking and financing.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
2. The norms of this Regulation are applicable to FCOs, taking into account the specifics of their activities and the organizational and legal form determined by the legislative and regulatory legal acts of the Kyrgyz Republic.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
3. FCOs carrying out operations in accordance with Islamic principles of financing are not entitled to charge remuneration in the form of interest, attract funds at interest, guarantee the return of an investment deposit or income on it, and must invest funds only in a business permitted by Shariah.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
4. Types of transactions and transactions for FCOs must be approved by the Sharia Board, whose main functions are to ensure that the transactions and transactions carried out by these FCOs comply with Sharia standards.
The Sharia Council can be created by associations (associations) of IFIs and CUs.
5. The activities of the Shariah Council established under associations (associations) of IFIs and CUs are regulated by the Regulations on the Shariah Council, which is approved by the members of the association of IFIs and CUs.
6. The activities and composition of the Sharia Council established in the FCO is determined and regulated by the Board of Directors (founders) of the FCO, in accordance with the Shariah Standards.
In the performance of its functions, the Sharia Council must be independent of the executive body of the FCO.
7. Members of the Sharia Council must meet the requirements established by the regulatory legal acts of the National Bank.
8. FCOs, when carrying out operations on Islamic principles of banking and financing, must comply with the requirements of the Law of the Kyrgyz Republic "On countering the financing of terrorist activities and the legalization (laundering) of criminal proceeds" and the regulatory legal acts of the National Bank aimed at countering the financing of terrorist activities and legalization (laundering) of criminal proceeds.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated August 21, 2019 No. 2019-P-33/43-8)
9. MFIs and CUs, in the presence of an appropriate license/certificate of the Bank of Kyrgyzstan, are entitled to carry out the operations specified in Section II of these Regulations, subject to the requirements of the legislation and regulatory legal acts of the Bank of Kyrgyzstan.
10. (No longer valid in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
II. Types of Transactions Compliant with Islamic Principles of Banking and Finance
Chapter 1
Mudaraba Transaction
11. Mudaraba is a transaction under which, on the basis of an agreement, one party - the investor - provides capital (cash), and the other party (mudarib) - accepts this capital and manages it in order to obtain profit, which is proportionally distributed between the parties in accordance with the terms of the agreement. If losses are incurred during the execution of the agreement, the investor bears losses in the amount of the provided amount of capital, and in this case the mudarib does not receive remuneration for his work. This rule for the distribution of losses is valid if the losses arose through no fault of the Mudarib.
If losses during the performance of the agreement arose due to the fault or illegal actions of the Mudarib, these losses must be covered by the Mudarib. At the same time, the investor has the right to receive from the Mudarib the amount transferred earlier under the agreement at the expense of security, and if it is not enough, then at the expense of other property of the Mudarib.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 21, 2016 No. 49/8)
12. Limited/Special Mudaraba - a Mudaraba deal, under the terms of which the investor determines the types of assets or projects to be invested by the Mudarib.
13. The Mudaraba deal is applied by the FCO in two cases:
- as a tool for raising funds in accordance with the requirements of the legislation of the Kyrgyz Republic , subject to the appropriate license from the National Bank;
- as a financing tool.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
14. The Mudaraba agreement must be concluded in writing.
15. FCO, acting as an investor, must evaluate the business plan, identify objects for investment, evaluate the activities of the client (1) and advise him subsequently during the execution of the agreement.
16. When issuing funds under a transaction, the limited/special mudaraba of the FCO must include in the contract a condition prohibiting the misuse of funds and the issuance of loans, loans and credits.
17. In order to properly fulfill obligations under the Mudaraba transaction, the FCO, acting as an investor, may receive collateral from the client in the form of a pledge of any form.
18. The Mudaraba agreement must provide at least:
1) an indication of the type of contract;
2) the amount of the amount provided;
3) the method of securing obligations;
4) rights and obligations of the parties;
5) the liability of the parties for non-fulfillment or improper fulfillment of the obligation to compensate for losses incurred during the performance of the agreement due to the fault or illegal actions of the parties;
6) the procedure for the distribution of profits and losses between the parties;
7) conditions for the execution by the parties of the agreement independently or with the involvement of qualified specialists;
8) keeping records of the use of received funds, which allows, at the end of the agreement or a separate stage, to determine the profit received to be distributed between the parties;
9) the procedure for terminating the contract.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 21, 2016 No. 49/8)
19. The profit of the parties to the contract is determined in the manner prescribed by the contract as a share of the profit received. The procedure and terms for the distribution of profits from mudaraba operations are established in accordance with the terms of the agreement.
20. Mudaraba agreement cannot be terminated unilaterally if:
- the mudarib has started to fulfill the contract and is already using the funds in the course of entrepreneurial activities;
- the term of the agreement has not expired.
Chapter 2
Sharak/Musharakah Agreement/Partnership
21. Sharika/Musharakah is a partnership agreement between the FCO and one or more parties, whereby each partner contributes a certain amount of money, or, with the consent of all partners, tangible assets, and in which the coordinated management of the case is carried out using joint assets on terms of distribution of profits according to the agreement, and each partner bears losses in accordance with his contribution to the common capital.
22. The Sharikah/Musharakah agreement is classified into two main categories:
1) association of participants without forming a legal entity;
2) association of participants with the formation of a legal entity, including partnerships and or legal entities established in accordance with the legislation of the Kyrgyz Republic.
Unless otherwise follows from the subject matter of the agreement, the Sharika/Musharakah agreement applies both to associations of participants without forming a legal entity, and to associations with the formation of a legal entity.
Sharika/Musharakah Muntahiya Bittamlik is a form of Sharika partnership in which one of the partners gradually buys out, in the amount determined by the agreement, the share of the other / other partners until the ownership of this share passes completely to him. This operation begins with the formation of a partnership, after which the buying and selling of shares between the two partners begins.
The acquiring partner is only allowed to give a commitment to buy shares or a share in the authorized capital. This obligation must be independent of the partnership agreement. In addition, the sales contract must be independent of the partnership contract. It is not allowed for one contract to be concluded subject to the conclusion of another contract.
23. In a Sharika/Musharakah Muntahiya Bittamlik transaction, the general rules of a Sharika/Musharakah contract apply and it is not permitted to include any provision in the Sharika/Musharakah contract that entitles either party to withdraw its share of the capital of the company.
The Sharika/Musharakah agreement is concluded in writing. If a legal entity is created on the basis of an agreement, it is subject to registration in the manner prescribed by the legislation of the Kyrgyz Republic. The purpose of the partnership must be clearly stated in the partnership document or the charter of the legal entity.
24. FCOs are allowed to enter into partnership agreements if the funds or property provided by the parties for the purpose of carrying out partnership activities come from acceptable sources. When creating a legal entity based on a partnership, all necessary confirmations must be obtained on compliance with the rules and principles of Shariah when performing operations in the process of partnership activities, including management in compliance with Shariah rules.
25. When amending the partnership agreement, if the shares in the distributed profits are revised, then each partner must bear the losses in accordance with his contributed share in the capital.
26. If tangible assets (goods) are contributed to the capital of a legal entity established on the basis of a Sharika/Musharakah partnership agreement, the monetary value of such assets must be determined by independent experts.
27. It is not allowed to make debt obligations (accounts receivable) as a contribution to the capital of a legal entity established on the basis of a Sharika/Musharakah agreement. Debt obligations may be contributed to the capital of a partnership established on the basis of a Sharika/Musharakah partnership only if they are inseparable from other assets presented as a contribution to the capital. At the same time, the value of net assets must be confirmed by independent auditors.
28. The agreement on the creation of a legal entity based on partnership must provide for the obligation of each partner to act within the framework of the agreement and in the interests of the company, as well as unconditional observance of the rules and principles of Shariah.
29. The agreement may provide for a condition on the management of the legal entity by certain partners or one of the partners. In this case, other partners are obliged to adhere to this decision and not take action on behalf of the company.
30. The Sharika/Musharakah agreement may provide for the appointment of a manager not from among the partners, for a fixed remuneration included in the costs of the company, or payments in the form of a part of investment profits and a fixed remuneration to encourage the manager. If from the very beginning management is carried out on the basis of a share of the profits received, then this action classifies the manager as a mudariba, in which case he is only entitled to a share in the profits, if any, and he is not paid any more remuneration for the services of the manager.
31. It is not permitted in the Sharika/Musharakah contract to determine a fixed remuneration for a partner who contributes to the management of the funds of a company established on the basis of the Sharika/Musharakah contract, or who provides his services in any other form, such as providing services in areas of accounting. At the same time, it is allowed to give him a greater part of the profit than that which he would have earned in accordance with his share in the partner capital.
32. The sharika/musharakah agreement may provide for the liability of the partners in the form of providing security to cover losses in case of misconduct, negligence, negligence or breach of the agreement by the partners/partner.
33. If any or all of the partners' indemnity is provided by a third party, then such an indemnity must meet the following requirements:
1) the legal capacity and financial obligation of such a third party acting as a guarantor must be independent of the sharika/musharakah agreement;
2) the guarantee cannot be given for a certain amount of compensation and cannot be linked to a Sharikah/Musharakah agreement;
3) the third party acting as a guarantor must not own more than half of the capital in the company to which it gives a guarantee;
4) the company that received the guarantee must not own more than half of the capital of the company providing such a guarantee;
5) the partner in whose favor a third-party guarantee has been issued does not have the right to refuse to fulfill its obligations under the contract if the guarantor fails to fulfill the terms of the guarantee.
34. Sharika/Musharakah agreement must provide for the distribution of profits between the parties in the form of a share of the profits received in proportion to the contribution of each partner to the capital of the company. Profit cannot be set as a fixed amount of money.
35. The Sharika/Musharakah agreement may provide for a change in the partners' share in the distribution of profits on the date of its distribution or the right of a partner to transfer part of the profit due to him in favor of another partner on the day of distribution of profits.
36. The FCO is not entitled to voluntarily accept the losses of other partners. But the FCO's sharika agreement may provide for the right of other partners to voluntarily accept, without any precondition, liability for losses at the time of their occurrence.
37. It is permitted for partners to agree to use some method of profit distribution, whether it is permanent or not, for example, to agree that the size of the profit share in the first stage of the agreement should be one, and in the second stage - another, depending on the discrepancy two periods or the amount of profit received. This is permitted, provided that the use of such a method does not lead to a situation where one of the partners is excluded from participation in the profits.
38. Profit should be distributed according to actual results, without taking into account the expected future profit from the company's activities.
39. It is not allowed to include in the terms or method of distribution of profits under the agreement Sharika / Musharakah any provision or condition that may lead to a violation of the principle of distribution of profits. Any condition or method of distributing profits that could lead to such a result will render the contract null and void.
40. Partners are not allowed to include in the contract a provision according to which one or more partners can receive a fixed amount from the profits or an amount calculated as a percentage of the capital of the company created on the basis of the Sharika/Musharakah agreement.
41. It is permitted to agree that, if the amount of the profit received is above a certain maximum threshold, which the parties can pre-determine, the excess profit can be transferred to a certain partner. The parties may also agree that, if the profit does not exceed the maximum amount or is below such amount, the profit is distributed in accordance with their agreement.
42. At the end of the partnership or its liquidation, the profits may be finally distributed on the basis of the proceeds from the sale of all existing assets of the company established on the basis of the Sharika / Musharakah agreement, at market value.
43. It is allowed to distribute some funds to any party in advance, i.e. prior to actual or constructive evaluation, provided that final actual settlement takes place at a later stage. In this case, the parties are obliged to compensate the company for any amount they received in excess of their share of the profits due to them after an actual or constructive assessment.
44. If the subject of the Sharika/Musharakah agreement are assets acquired for leasing (leasing) that will generate income, or the subject of the agreement are services that will generate income, then the amount is distributed annually to the partners in advance and is subject to settlement and compensation at the end of the agreement sharika/musharaka.
45. It is permitted, on the basis of the articles of association or the decision of the parties, not to distribute the profits of the company or to keep a certain amount of profits periodically as a solvency reserve or a reserve to cover the loss of capital (investment risk reserve).
46. The parties may conclude a sharika/musharakah agreement both for a fixed period and without specifying a period, or establish conditions that are the basis for terminating the agreement or canceling the agreement.
Each partner has the right to terminate the sharika/musharakah agreement (i.e. withdraw from the company) after providing his partner (partners) with proper notice of this. In this case, he is entitled to his share contributed to the capital / assets of the company, and his withdrawal does not lead to the termination of the partnership of the remaining partners.
With a fixed-term contract, the parties are allowed to agree on the termination of the partnership ahead of schedule. In all such cases, the obligations and actions that the partners perform before the termination of the agreement remain unchanged and continue to exist.
47. The partner is allowed to commit to buy, either during the life of the company or at the time of its liquidation, all the assets of the company created on the basis of the Sharika/Musharakah agreement at their market value or by agreement on the date of purchase. It is not permitted to make a commitment to purchase the assets of a Sharika/Musharakah company at a predetermined nominal value.
48. An enterprise established on the basis of a Sharika/Musharakah agreement terminates its activities upon the expiration of the agreement or before this date if the partners decide to terminate it ahead of schedule, or in the case of an enterprise established for a specific business, after the actual liquidation of assets, which constitute the subject matter of the partnership agreement. Termination of the Sharika/Musharakah contract may take place in the event of a proposed liquidation. In this case, the Sharika/Musharakah agreement is considered to be completed and the parties, if desired, enter into a new partnership whereby the assets not sold in the actual liquidation but valued on the basis of the proposed liquidation are considered to be the capital of the new enterprise.
If the liquidation is related to the expiration of the agreement, then all existing assets are sold in accordance with current market prices, and the proceeds from their sale are used for the following purposes:
a) liquidation costs;
b) for payment of financial obligations;
c) distribution of the remaining assets among the partners in accordance with their share in the capital/assets of the company. If there are not enough assets, and the parties cannot return all their invested capital, the assets are distributed in proportion to their share in the capital of the company.
49. A company established for the purpose of providing services is created on the basis of an agreement between two or more partners for the provision of services relating to a certain profession or skilled work, or for the provision of certain services or professional services, as well as for the manufacture of goods. Partners distribute profits according to the agreed ratio.
50. A company established on the basis of a partnership for the provision of services has no cash capital. Partners may allocate among themselves the different types of services provided and may assign some or all partners to provide a range of services or a particular service in a manner whereby they can reach an interaction for the purpose of providing the full range of services.
51. Profits are distributed among the partners in accordance with the agreed ratio, but the contract cannot provide for a provision according to which a certain partner is paid some fixed amount from the profits received.
52. If the means of production are necessary for a company established on the basis of a partnership to provide services, then each party is allowed to provide the necessary means of production that are required for the provision of services. In this case, each partner has ownership of the means of production that he provided. Partners can contribute funds to purchase the necessary equipment or tools based on joint ownership. It is also permitted for a party to a Sharikah/Musharakah contract to provide the means of production needed by the company for a fee that will be charged to the operating expenses of the company.
52-1. Agreements/partnerships applied in the agricultural sector:
1) Musakat agreement (irrigation partnership) is an agreement under which one party provides certain agricultural trees / plants to the other party caring for them, with the condition that the crop / fruits are divided between the parties according to the shares determined at the conclusion of the agreement.
2) Muzaraa agreement is an agreement under which one party provides land to the other party for the organization of agricultural work for a share of the crop agreed upon at the conclusion of the agreement.
3) Mugarasa agreement is an agreement whereby one party provides treeless land to the other party for planting trees on it, followed by the division of trees and crops / fruits in accordance with the coefficient agreed in the contract.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated April 22, 2020 No. 2020-P-33/24-3)
52-2. For the correct implementation of financing in accordance with Islamic principles of banking and financing for the development of agriculture, it is necessary to be guided by Sharia standards, and there must be employees in the FCO who have the appropriate knowledge of Sharia standards to apply them in their work.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated April 22, 2020 No. 2020-P-33/24-3)
Chapter 3
Murabaha Transaction
53. A murabaha transaction is a transaction involving the sale of goods by installments, acquired by the FCO at the request of the client, or owned by the FCO at the time of the client's request. The markup can be set as:
- a fixed lump sum;
- share of the cost of goods.
An essential condition of the Murabaha transaction is the mandatory indication and allocation of the markup in the sale price.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
54. The Murabaha transaction is carried out on the basis of a written application to the FCO by a potential client who wants to purchase a certain product from the FCO.
In the application, the client indicates the name of the product, the approximate price at which he is ready to purchase it, as well as the terms of purchase and, as a rule, payment by installments. The customer can also specify a merchant from which FCOs can purchase the item. FCO has the right to independently choose a seller if there are more acceptable offers from other sellers.
55. When selling goods to a client under a Murabaha agreement, the FCO must be the owner of the goods. The FCO enters into a contract for the sale of goods with a certain seller, while the contract states that the bank buys the goods for subsequent sale to the client under the Murabaha agreement.
56. The Murabaha agreement is concluded in writing, simple or notarized. Ownership of the goods passes after full payment of the price (at its discretion, the FCO may decide to transfer ownership of the goods before full payment of the price of the goods). If the ownership right is subject to state registration, registration is carried out upon transfer of the ownership right (before or after full payment). If the property alienation agreement is subject to state registration, the acquirer's ownership right arises from the moment of its registration.
Payments for goods purchased by the customer under a Murabaha agreement can be made in regular installments on a short or long term basis. After the conclusion of the agreement, FCOs cannot demand additional payments due to delay or extension of the payment period arising for any reason or without reason.
57. It is not allowed to conclude a contract of sale if the client was associated with the seller by any previous contractual obligations in relation to the goods that are the object of purchase and subsequent sale under the Murabaha agreement.
The seller must be a third party in relation to the client and FCO. It is not allowed for the client to act both as a seller in a transaction for the sale of goods and as a client under a murabaha agreement with the FCO.
In exceptional cases, FCOs may purchase goods from a party who is a close relative of the customer, subject to the right to sell and repurchase.
FCO has the right, having bought goods from the seller, to establish the possibility of its return within a certain period. If the client does not redeem the goods from the FCO, then the FCO can return the goods to the supplier within a certain period, by agreement of the two parties. This possibility remains valid until the purchase of goods from FCO.
58. In the contract of sale with the supplier of goods, the following shall be indicated:
- names of the parties;
- the subject of the agreement;
- Name of product;
- quantity of goods, price, terms and conditions of payment;
- delivery time;
- rights and obligations of the parties;
- Penalties in case of non-fulfillment of obligations;
- method of provision;
- other conditions.
FCOs can conclude a sale and purchase agreement on their own or with the help of an agent. A client can be appointed as an agent of the FCO, while the client acts on behalf and at the expense of the FCO.
Where the client is acting on behalf of the FCO as an agent, the following conditions must be met:
a) FCO must pay the seller and not deposit the price of the goods on the client's account as an agent;
b) FCO must take the seller's documentary evidence of the sale.
All documents and contracts related to the sale-purchase of goods must be on behalf of the FCO, even if the client acts as an agent of the FCO.
FKO must receive the goods from the supplier's premises or any other place that was specified in the terms of delivery.
Shipping costs are borne by FCO. These costs are subsequently included in the cost of the goods.
FCO assumes responsibility as the owner of the goods and bears the subsequent risks, which can be insured. The insurance premium that arises before the sale of the goods to the client belongs entirely to the FCO.
Insurance costs are included in the price of goods purchased under the Murabaha contract.
59. FCOs, in order to ensure the proper fulfillment by the client of the obligation to conclude and fulfill the Murabaha agreement, may conclude an agreement with the client on the pledge of funds or on the acceptance of another type of pledge. The amount of money transferred as collateral cannot be invested by the FCO unless permission has been obtained from the client.
FCO is obliged to return the deposit after the execution of the Murabaha agreement by the client. The deposited amount can be credited as payment in accordance with the Murabaha agreement at the request of the client.
FCO bears the risks associated with damage to the goods during transportation or storage, and they cannot be covered by a deposit.
In the event of a breach by the client of an obligation, FCO has the right to sell the purchased goods to third parties. If the price of the actual sale was lower than the price at which the FCO purchased the goods, the FCO has the right to deduct the indicated difference from the amount of the deposit, and return the balance to the client.
The FCO may take an advance payment after the conclusion of the Murabaha agreement for the customer of the purchase. This can be done during the drafting of contracts at the stage when the customer has made a commitment to buy the product. Wherein:
1) if the seller of the goods was chosen by the client himself, the FCO has the right to include the following conditions in the contract:
a) on the provision by the client of security for the proper execution of the agreement for the sale of goods by the seller;
b) on reimbursement by the client of all losses incurred by the FCO due to non-fulfilment of the agreement by the seller, including possible legal costs, including at the expense of security, if the seller fails to fulfill the contract of sale. This condition must also apply if the Murabaha agreement has not been made;
2) when concluding a murabaha agreement, all conditions for the implementation of a trade operation should be provided for, including:
a) markup - the remuneration that the FCO will receive from this transaction;
b) selling price;
c) the condition that all expenses of the FCO are included in the sale price, including payments to a third party, with the exception of the costs of paying salaries to the employees of the FCO;
3) the selling price and markup cannot be set in an indefinite manner, for example, the selling price and markup should not depend on any indicators that will be known in the future. It is acceptable if the selling price and markup are set depending on the indicators at the agreement stage so that the FCO markup is known to the client in advance before signing the Murabaha agreement.
The size of the markup cannot depend on temporary factors;
4) FCO may include the following conditions in the Murabaha agreement:
a) that FCO shall not be liable for any or all defects in the goods after the goods have passed into the possession of the customer;
b) that the FCO has the right to sell the goods to a third party if the client refuses to accept the goods after the entry into force of the Murabaha agreement with the client reimbursement of the amount missing to cover the expenses of the FCO.
FCO is not entitled to make murabaha transactions:
a) on deferred liabilities related to precious metals (gold, silver, etc.) and foreign currency;
b) with working capital, where assets are secured by receivables;
c) when refinancing a transaction.
The parties to a murabaha transaction are prohibited from participating in a sharika/musharakah agreement or in a transaction containing an obligation of one of the parties to redeem the participation (share) of the other party in the sharika/musharakah agreement using a murabaha transaction for cash or deferred obligations.
60. Payment under the Murabaha agreement is made by the client in accordance with the terms of the agreement.
The FCO may demand early repayment from the client in the event of an unreasonable delay in the next installment, subject to prior notification to the client of the terms of payment.
If the customer has not paid the price in full, the FCO will not register the title to the goods in the name of the customer until the fees have been paid in full.
FCO can sell the goods if the client delays payments for more than the period specified in the contract. If the FCO sells goods to a third party, then the client is reimbursed for those payments that have already been received from him.
If the FCO is provided with security from the client, then the FCO, at the order of the client, can sell the pledge to cover the debt under the Murabaha agreement without going to court.
In case of delay in payments at the appointed time, the client is obliged, in accordance with the Murabaha agreement, to send the amount established by the agreement for charitable purposes.
61. No commission and fee for the opportunity to provide financing is charged from the FCO client.
The costs for the preparation of documents under the contract are shared between the FCO and the client, unless they have agreed that one of the parties will pay the costs. The condition must be observed that all costs are fairly indicated and reflect the amount of work performed.
If the Murabaha agreement is carried out through syndicated financing, then the FCO, which acts as the organizer of the syndicated financing, has the right to declare the remuneration due, which must be paid by the participants in the syndicated financing.
The FCF may charge a fee for the preparation of a feasibility study if it is at the request of the client and for its benefit, and the client has agreed to pay the FCF.
62. The initial direct costs of the FCO (commission to an intermediary, fees for legal services, etc.) associated with the conclusion of an agreement for the purchase of the subject of a Murabaha agreement from a supplier are recognized as expenses of the current period.
63. The subsequent costs of the FCO associated with the acquisition of the goods, as well as the costs of transportation, duties and other costs are included in the purchase price of the goods.
64. In accordance with the terms of the concluded agreement on the sale of goods to the client, the FCO recognizes the debt, and the client in the amount that the client is obliged to pay to the FCO in accordance with the contract.
When conducting this transaction, the FCO should pay special attention to country and transfer risks, the reliability of the supplier and the insured of the goods, as well as the security of delivery of the goods.
Chapter 3.1 Murabaha commodity transaction
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.1. Commodity murabaha (tawarruk) is a transaction concluded for the purpose of obtaining funds, consisting of two contracts: the purchase of goods with a deferred payment on the terms of the murabaha agreement and the subsequent sale of this product to a third party that is not the original seller, for immediate payment.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.2. A commodity murabaha transaction is used by the FCO as a tool to raise funds, including investments. This transaction cannot be used as an instrument for financing FCO clients or raising funds from FCO clients.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.3. When selling goods, the party selling the goods must be the owner of the goods.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.4. The funds received as a result of the transaction of commodity murabaha must be used in transactions that comply with Sharia standards.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.5. Contracts for a commodity murabaha transaction are concluded in writing. Links between the obligations of the parties under two contracts (a contract for the purchase of goods with a deferred payment and a contract for the sale for immediate payment) are not allowed.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.6. The buyer of the goods (object of commodity murabaha) must be a person who is not a seller, from whom the goods were purchased with a deferred payment (the goods must be sold to a third party).
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.7. At the time of the transaction, the goods must be available to the seller and must be in his ownership. If the goods are not available at the place of conclusion of the transaction, it is necessary to additionally provide the buyer with data on the goods in the form of specifications or samples, as well as information on the volume of the goods and its location, so that the purchase of the goods by the buyer is valid and not fictitious.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.8. When concluding a commodity murabaha transaction, the buyer of the goods may appoint the seller from whom the goods were purchased with deferred payment, or his representative as an agent for the sale of the goods purchased from this seller (or his representative). In such cases, the agency contract must be concluded after the buyer takes possession of the goods.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
64.9. A commodity murabaha transaction cannot be concluded in relation to gold, silver or various types of currency.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
Chapter 4
Transaction of Ijara and Ijara Muntahiya Bittamlik
(Chapter title as amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
Attention! By the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6, changes were made to the title of Chapter 4, stated in the state language.
65. Ijara is a transaction for the special acquisition by the FCO of equipment or other property at the request of the client, or owned by the FCO at the time of the client's request and providing it to the client for rent (hire) for an agreed period.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 21, 2016 No. 49/8)
66. Lessee - a natural or legal person who, in accordance with the Ijarah agreement, accepts the subject of the agreement for a certain fee for a certain period and under certain conditions for temporary possession and use.
Lessor - FCO, which, at the expense of its own and / or borrowed funds, acquires property during the implementation of the Ijarah agreement and provides it as an Ijarah object to the tenant for a certain fee, for a certain period and under certain conditions for temporary possession / use with or without transfer transfer to the tenant of the right of ownership to the subject of the agreement.
Seller - an individual or legal entity who, in accordance with the sale and purchase agreement concluded with the lessor, sells to him, within the prescribed period, the property that is the subject of murabaha. The seller may simultaneously act as a tenant within the same Ijarah agreement.
Rent payments are a payment for possession and use of the subject of the Ijarah agreement. These payments include the reimbursement of the lessor's expenses associated with the acquisition and transfer of the ijarah object to the lessee, the reimbursement of expenses associated with the provision of other services provided for in the contract, as well as the income of the lessor.
67. Ijara is concluded by FCO on the basis of the client's application, as well as financial and legal documents necessary for making a decision on the conclusion of the agreement.
In order to make a decision to enter into an Ijara transaction, the FCO must assess the tenant's ability to pay rent, as well as assess the liquidity of the property in order to identify opportunities for releasing or selling the property.
(As amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated December 21, 2016 No. 49/8, March 28, 2018 No. 2018-P-12/10-6)
68. In case of a positive decision on the part of the FCO, the tenant provides a written obligation to lease the property.
The tenant pays a certain amount by agreement of the parties as a guarantee of the fulfillment of the obligation - to rent the property. The amount paid is used only to compensate for damages in the event of a breach by the customer of an obligation.
Upon agreement with the customer, the FCO can use it for investment on the basis of a Mudaraba agreement concluded between the FCO and the tenant, if there is an appropriate license.
69. The subject of an ijara transaction may be enterprises and other property complexes, buildings, equipment, vehicles and other movable and immovable property.
70. The leased property must be used while ensuring its safety, and the benefits received from the execution of the Ijarah agreement must comply with the legislation of the Kyrgyz Republic and the requirements of Shariah.
71. The subject matter of an Ijarah agreement may be a share in certain assets held together with the lessee, whether or not the lessee is a partner of the lessor. In this case, the lessee can benefit from the leased share in the same way that the lessor uses, i.e. by a time-sharing regime or by defining some part of the property.
72. The lessor shall be liable for any defects caused to the leased property resulting in a deterioration in the quality of the property, and liability for any deterioration that the leased property may suffer as a result of its own actions or as a result of events beyond its control, but affecting the benefits that were supposed to be received under the Ijarah agreement.
73. If the benefit from the leased property is reduced in whole or in part as a result of the wrongful actions of the tenant during the lease of this property, then the tenant is obliged to remove the obstacles to the receipt of the benefit by the tenant. In this case, the lease term is extended for the period during which the lessee could not benefit from the leased property, the lessee must not refuse to rent during the period of lost profit.
74. The lessor performs basic maintenance. The tenant must perform routine or periodic (routine) maintenance.
75. The lessor is liable for the rented property during the period of the Ijarah agreement, if the tenant does not commit any misconduct or negligence in relation to the rented property.
If property insurance is required by law, the landlord must insure it in accordance with Shariah standards. If it is impossible to insure property in accordance with Shariah standards, then property can be insured by the traditional method with the appropriate approval of the Shariah Council of the FCO. Insurance costs are included in the rent. After signing the contract, the landlord cannot charge the tenant any funds in excess of the established rent. The landlord may also appoint the tenant as an agent to insure the property at the expense of the landlord.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
76. In order to fulfill the Ijarah agreement, the FCO acquires ownership of property. Property can be acquired from a person who will be a subsequent tenant and then leased to that person.
77. The lessee may enter into a sublease agreement on terms different from the lease agreement, with notice to the lessor.
78. A lessee may lease property to its owner in the first stage of the lease for a rent that is lower, equal to, or higher than what he pays, if both rents are paid on an immediate delivery and immediate payment basis. Counter payments cannot be higher due to deferred payment.
79. The lessor may purchase or manufacture the property described in the specifications at the request of the lessee.
The tenant has the right to refuse property that does not meet the specification.
80. The tenant, together with the FCO, may purchase the property that he plans to lease. Accordingly, the rent will be paid by the tenant on the share that he does not own.
81. The FCO may appoint a tenant or a third party as an agent to acquire property at an agreed order and price for further lease to the tenant.
82. The Ijarah agreement is concluded in writing and is subject to notarization and state registration in cases stipulated by the legislation of the Kyrgyz Republic.
83. The essential components of the Ijarah agreement are:
a) the name, as well as a description sufficient for identification of the subject of ijara;
b) the rights and obligations of the parties related to the acquisition and transfer of the ijar item;
c) the amount, procedure, conditions and terms for making lease payments;
d) an indication of the party that selects the subject of ijara and the seller;
e) other conditions.
84. If the landlord does not provide the property to the tenant within the time period specified in the Ijarah agreement, the rent is not paid for the period between the date the agreement enters into force and the actual date the property is provided to the tenant. The rent is reduced accordingly, unless the parties agree that the lease term will be extended for a period equivalent to the non-delivery period after the end of the original contract date.
85. The customer makes an advance payment, which the lessor can withhold in case of non-fulfillment of the Ijarah agreement due to the fault of the tenant in order to compensate for the damage.
86. The lessor has the right to conclude several ijarah agreements in respect of the same property leased for different periods to several tenants, provided that these two agreements are not executed simultaneously in relation to the same property and in the same period.
87. An Ijarah agreement may be entered into with several tenants entitled to the same benefit in relation to some property for the period of the lease, without specifying any specific period of time for a specific person. In this case, each tenant can benefit from the property during the period allocated to him, according to the stipulated rules between tenants.
88. Rent can be made in cash, in kind (goods) or some kind of advantage (services). The rent is set either as a lump sum payment covering the period of the Ijarah contract, or in the form of partial payments for certain periods of the agreement. The rent may be determined as a fixed amount or may be revised as agreed by the parties.
89. Rent is contractually binding, and the lessor's right to receive rent begins when the lessee begins to benefit from the lease of the property or when the lessor secures the lessee the right to benefit from the leased property.
90. In the case where the rent is subject to revision, it is necessary to provide for the amount of the rent for the first period of the Ijarah agreement. It is allowed to determine the amount of rent for subsequent periods according to a certain comparison base. This basis of comparison may be based on a precise, non-contestable order that is the determining factor in determining the amount of rent for the remaining periods. This base for comparison can provide its own specific threshold: both maximum and minimum.
91. By agreement of the parties, part of the rent can be paid to the lessor, the other part is used to cover any expenses approved by the lessor, such as: the cost of basic maintenance, insurance, etc.
92. The two parties may agree to change the amount of the rent for future lease periods, i.e. periods in which the tenant is not yet receiving any benefit from the lease, by renegotiating the terms of the Ijarah agreement. Rent not paid for any previous periods becomes a debt that the tenant must pay to the landlord, so it cannot be increased.
93. In order to secure the payment of rental payments and to prevent negligence in the leased property, the landlord is allowed to require the provision of collateral (collateral) in the form of liquid assets.
94. The FCO has the right to demand early repayment of lease payments from the client in the event of an unreasonable delay in the next installment of lease payments, provided that the client is reminded of the payment terms.
95. Both parties may agree on the immediate payment of rent. The rent may be paid in instalments, in which case the landlord may provide that the tenant must immediately pay the remaining payments if, after receiving appropriate notice of the need to pay for a certain period, he delays the installment without a justified reason. The payment of the remaining payments before the due date due to non-fulfillment of obligations shall be settled at the end of the period of validity of the Ijarah agreement or, if the Ijarah agreement terminates prematurely, then at the time of such termination. Any extension of the agreement period by the landlord after the end of the stipulated period for immediate payment shall be deemed an agreement to defer payment for the extended period and not a right of the tenant.
96. The landlord may not increase the agreed rent if the tenant is in arrears in payment.
97. An Ijara or Ijara Muntahiya Bittamlik agreement may provide for a tenant who unreasonably delays payment to pay a certain amount or an additional share of the due amount of rent. The payment of such an amount in excess of the due rent is directed to charitable purposes in accordance with the internal policy of the FCO, approved by the Shariah Council.
In the event of a loss of tenant security, the lessor may deduct from such amounts only the amount that is due to it as rent for previous periods, and not all amounts of installments, including payments that are not yet due for periods for which the lessee has not yet benefited from the leased property. The landlord may also deduct from the amount of the guarantee the compensation that the tenant must pay for breach of contract.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
98. The lessor may sell the leased property to a third party, informing him of the existence of the Ijarah agreement. In this case, all rights and obligations under the contract will pass to the new owner.
99. In case of destruction/destruction of the leased property, the Ijarah agreement is terminated, the remaining rental payments are not paid.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2018 No. 2018-P-12/10-6)
100. The lessee shall be liable for damages incurred by the lessor due to the fault of the lessee.
101. In case of partial damage to property, which led to a decrease in planned income, the tenant has the right to terminate the Ijarah agreement. Also, the parties may in this case agree to change the amount of the rent, but in this case, the lease payments are not charged for the period of lost profits. The lessor must provide similar property for the further implementation of the Ijarah agreement, otherwise the agreement is terminated.
102. If the tenant ceases to use the leased property or returns it to the owner without his consent, then the rent remains payable to the owner for the remaining period of the Ijarah agreement, and the landlord cannot rent it to another tenant during this period of the agreement, but must retain property owned by the current tenant.
103. An Ijarah agreement may be terminated:
a) by mutual agreement;
b) in case of violation of terms or termination of lease payments;
c) in case of damage to the leased property;
d) upon expiration of the agreement;
e) when selling property to a tenant.
104. Ijarah muntahiyya bittamlik transaction is a transaction that includes an Ijarah contract and in accordance with which the client undertakes to redeem the leased property (asset), either at the end or in stages during the Ijarah period, in accordance with the contract.
105. In the Ijara muntahiyya bittamlik agreement, the transfer of ownership of the leased property is confirmed by a document separate from the Ijara agreement, through the obligation of the lessor:
a) sell for a nominal or other agreed price or through progressive payment of the remainder of the rent or by payment of the market value of the leased property;
b) donate it without giving a reason (unconditionally);
c) donate it after paying the remaining payments.
In all the above cases, a separate document proving the obligation to donate property, sell it or donate it after the occurrence of a certain event, must be drawn up separately from the ijara muntahiyya bittamlik contract. It cannot be considered as an integral part of the Ijarah agreement.
106. The obligation to transfer ownership for the lessor under the Ijara muntahiyya bittamlik contract is mandatory, and there is no separate bilateral contract.
107. The transfer of ownership is carried out on the basis of a donation or sale agreement, which is concluded separately from the Ijarah agreement concluded earlier.
108. In the case of the conclusion of an agreement with a suspensive condition, upon fulfillment of the conditions, a new agreement for the transfer of ownership is not concluded.
If at least one payment is not paid, the ownership of the property is not transferred.
109. The rules governing the Ijarah Treaty should also apply to the Ijarah Muntahiya Bittamlik Treaty, i.e. the lessor assumes the obligation to transfer ownership of the leased property to the lessee.
110. The transfer of ownership of the leased property cannot be carried out by implementing the sale contract in parallel with the Ijarah contract, since the sale contract comes into force on a certain date in the future.
111. If the leased property is destroyed or if the continuation of the lease becomes impossible before its expiration due to a reason that is not attributable to the tenant, then in both these cases the rent is adjusted based on the prevailing market value.
Chapter 5
Qard Al-Hassan Transaction
(Chapter title as amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
112. Qard Al-Hassan is a transaction whereby one party provides funds to the other party without additional benefit to the party providing the funds.
In this case, the party that accepted the funds guarantees the return of funds at the first request of the other party.
The FCO can be both the party that accepted the funds in accordance with the requirements of the legislation of the Kyrgyz Republic provided for the FCO, and the party that provided the funds, in accordance with the terms of the Qard Al-Hassan agreement .
113. The Qard Al-Hassan agreement is concluded in a simple written form.
The Qard Al-Hassan agreement implies the absence of any profitability from one contracting party and the possibility of disposing of the funds received from the other contracting party.
The Qard Al-Hassan agreement must contain the following essential parameters and conditions:
- the amount of the amount provided;
- the terms of the agreement, the date of return;
- rights and obligations of the parties;
- (repealed in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12).
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
113-1. The Qard Al-Hasan transaction is applied in two cases:
- as a tool for raising funds, in accordance with the requirements of the legislation of the Kyrgyz Republic (only for the CU, if there is an appropriate license from the National Bank to raise funds);
- as a financing tool.
In some cases, the FCO may consider issuing a loan to a client under the terms of a Qard Al-Hassan agreement .
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
114. Funds raised under the terms of the Qard Al-Hassan agreement form the resource base of TCFs and are treated as demand deposits.
Under the terms of the Qard Al-Hassan agreement , the client provides the FCO with funds on an interest-free basis, with the client's ability to freely dispose of them, and the FCO, in turn, can use part of the attracted resources in accordance with its investment policy.
FCO, in order to maintain the required level of current liquidity and the ability to fulfill obligations in a timely manner, it is necessary to maintain a sufficient amount of cash on hand or on a current account.
(Paragraph 4 has become invalid in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
115. (No longer valid in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
Chapter 6
Salam Transaction
116. Salam is a transaction for the purchase of goods on the basis of a deferred delivery, subject to payment of the cost of the goods at the time of conclusion of the agreement.
117. A parallel salam is a transaction that operates through two separate contracts. In the first contract, the FCO acts as a buyer and concludes an agreement with the customer on the purchase of a certain product with subsequent delivery and payment upon signing the contract.
According to the second contract, FCO sells the same goods, in the same quantity and on the date specified in the first contract, to another customer, who pays the cost of the goods at the time of signing the second contract.
118. Under salam and parallel salam agreements, the FCO can act as both a buyer and a seller.
119. FCO purchases goods under salam and parallel salam agreements and sells them at the request of a solvent client.
120. FCO is a person who carries out both the acquisition of goods and their sale.
121. The seller is a legal or natural person from whom the FCO purchases goods.
122. Interchangeable goods are those goods that have common characteristics that do not differ significantly from each other. Any interchangeable goods can be replaced by other goods in the event of their destruction, when it is not necessary to assess the value of the damaged or replaced goods in their valuation.
123. For the implementation of salam transactions, separate agreements or a general cooperation agreement may be concluded, within the framework of which separate agreements may be concluded with an indication of their validity period.
124. In the master agreement, the parties define the scope of the agreement and the intention of the parties to purchase and sell, as well as determine the quantity and specifics of the goods, the method of their delivery, the basis for determining the price and the method of payment. In addition, guarantees and other conditions are provided.
125. The salam agreement is concluded in writing and, if required by law, is subject to notarization and state registration. The essential terms of the agreement are:
a) the sale of a certain product with deferred delivery;
b) payment of the cost of goods at the time of conclusion of the agreement.
126. The price under salam agreements can be set both in the form of cash and in the form of interchangeable goods (goods defined by generic characteristics).
127. If the price is determined in monetary terms, then the currency, amount and method of payment must be determined. If the price is determined in the form of interchangeable goods, then their grade, type, specification and quantity should be clearly established.
128. The price under the salam agreement is paid immediately at the time of its conclusion. In exceptional cases, payment may be delayed for a period of not more than three days, which should not affect the performance of the salam contract, provided that the delay period is not equal to or does not exceed the period of delivery of interchangeable goods.
129. It is not allowed to use debt as capital under a salam agreement.
130. A salam agreement is concluded for goods that can be weighed, measured or counted.
131. The subject of the agreement cannot be foreign currency, precious metals (gold, silver, etc.).
132. The goods must be in such a form that allows the description of the specifics, excluding any uncertainty, for the conformity of which the seller is responsible.
133. Goods should be specified in accordance with accepted practice and expert opinion.
134. The quantity of each unit of goods is determined depending on its condition and the nature of the goods, i.e. its weight, dimensions, volume and number of seats are indicated.
135. The goods must be available under normal circumstances in the place where they should be at the time of delivery and be available to the seller so that he can fulfill his obligation to deliver the goods to the buyer.
136. The parties set a specific date for delivery, but may set different dates for the delivery of goods, delivery of goods in batches, provided that their cost was paid at the time of the initial conclusion of the agreement.
137. The parties may determine the place for the delivery of goods. If the parties to the contract do not specify a place for the delivery of goods, then such a place is the place where the contract was concluded, unless it turns out that it is impossible to deliver the goods to that place. In this case, the place for delivery of goods is determined on the basis of normal practice.
138. Delivery of goods may be secured by any type of security for the obligation to make payments.
139. The buyer is not allowed to sell the goods until he has obtained ownership of them.
140. By mutual agreement of the parties, the salam contract can be completely terminated and obligations terminated in exchange for a full refund of the cost of the agreement. Partial cancellation is also permitted, i.e. cancellation of the delivery of part of the goods in exchange for the corresponding part of the reimbursement of the agreement value.
141. The seller is obliged to deliver the goods to the buyer on the agreed date, in accordance with the terms of the agreement, in accordance with the agreed specifications and in the agreed quantity. The buyer, on the other hand, must accept the goods if they meet the requirements stipulated by the specifications in the contract.
142. If the seller offers goods of a higher quality than those required by the contractual specifications, the buyer must accept the goods unless the seller charges a higher price for the higher quality. This applies only when the description (with lower quality specifications) provided for in the contract is not considered an essential condition.
143. If the quality of the delivered goods is below that required by the contractual specifications, then the buyer has the right to either reject or accept the goods in that condition. If accepted, the parties may agree to accept such goods at a reduced price.
144. The seller must deliver the goods in the form of products specified in the contract.
145. Goods may be delivered ahead of schedule, provided that the goods meet the agreed specifications and are delivered in the required quantity.
146. If the seller is unable to fulfill his obligation or the seller does not have all or part of the goods in stock on the due date, the buyer may:
a) wait until the goods are available or allow a longer period of time for the delivery of the goods;
b) terminate the contract and collect the paid funds.
The parties are also allowed to agree on the replacement of goods with other goods.
147. It is not allowed to include a clause providing for penalties for delaying the delivery of goods.
148. The seller is allowed to conclude a separate independent salam contract with a third party in order to purchase goods of the same specification as those provided for in the first salam contract in order to fulfill the obligation under the first contract and deliver these goods. Therefore, the FCO, acting as the seller in the first salam contract, becomes the buyer in the second salam contract.
149. The buyer is allowed to conclude a separate parallel salam contract with a third party for the purpose of selling goods purchased on the basis of the salam contract, goods whose description matches the description of the goods that are supposed to be purchased using the first salam contract. In this situation, the FCO acting as the buyer in the first salam contract becomes the seller in the second salam contract.
150. In both cases, the parties are not allowed to bind obligations under two salam agreements.
Obligations and rights under the two contracts must be separate in all respects. In the event of a breach of obligations under the first salam agreement, the other party (the injured party) does not have the right to attribute this damage or loss to the party with which the first party entered into a parallel salam agreement. Consequently, she has no right, on the basis of her losses or damages, which she bears under the first salam agreement, to terminate the second salam agreement or delay its implementation.
151. All the rules to which the salam agreement is subject apply also to the parallel salam agreement.
152. It is not allowed to issue commodity bonds for debt obligations arising from the salam agreement.
153. FCO in salam transactions purchases a product specified by the customer-client with its subsequent sale to the client at a price that includes the FCO margin.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 21, 2016 No. 49/8)
154. (Repealed in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 21, 2016 No. 49/8)
Chapter 7
Guarantees
(Chapter as amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
154-1. MFC, in the presence of the relevant license of the National Bank, have the right to issue guarantees within the limits established by the regulatory legal acts of the National Bank.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
154-2. The guarantee specifies the period of validity and the amount for which the guarantee is provided.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
154-3. The creditor has the right to demand the amount of the debt, both from the debtor and from the guarantor.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
154-4. It is not allowed to issue letters of guarantee in favor of the applicant, who will use them to obtain an interest-bearing loan or enter into prohibited transactions.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 30, 2014 No. 24/12)
Chapter 8
Transaction of Istisnaa and Parallel Istisnaa
(Chapter as amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-5. Istisnaa transaction is a transaction under which one party (contractor) undertakes to perform certain work (using raw materials and labor) on the instructions of the other party (customer) and hand over its result to the customer within the prescribed period, and the customer undertakes to accept the result of the work and pay pre-agreed price.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-6. The subject of the istisnaa agreement is the result of the contractor's activities in manufacturing the object, as well as its processing (improving the qualities or changing the properties of the object) or processing (creating a new object as a result of destroying the existing one) or performing other work (using raw materials and labor) and delivering its results according to certain specifications.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-7. A parallel istisnaa is a transaction that operates through two separate and independent contracts. In the first contract, the FCO acts as a contractor or supplier and concludes an istisnaa agreement with a client acting as a customer. In the second contract, the FCO acts as a customer and enters into another contract (parallel istisnaa) with a contractor or supplier in order to fulfill its contractual obligations under the first contract. Supplier or contractor - a legal or natural person engaged in entrepreneurial activities. Client - a legal or natural person who orders, under the Istisnaa agreement, the performance of certain works (using materials and labor) and the delivery of its results in accordance with certain specifications.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-8. Prior to concluding the istisnaa agreement, the client applies to the FCO with an application, according to which he asks the FCO to perform certain work (using materials and labor) and to hand over its results upon completion of the work in accordance with the agreed specifications. The parties to the contract determine the specifications of the order (project) for a certain price, which is paid immediately or after a certain period. FCO must assess the solvency of the customer, as well as, if necessary, assess its property on the basis of the financial documents provided.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-9. The FCO and the client enter into an istisnaa agreement before the FCO acquires ownership of the subject matter of the agreement to be sold to the client or ownership of the materials from which the subject matter of the agreement is produced, built and used to fulfill the customer’s order.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-10. The Istisnaa agreement is binding on its parties if all conditions are met, such as specifying the specification, specifying the type and price, specifying the terms, quality and quantity of the subject of the agreement to be produced. The customer has the right to choose (to accept the subject of the agreement or refuse) if the subject of the agreement does not meet the agreed specifications.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-11. The istisnaa agreement is concluded in writing and is legally binding. The parties to the agreement are bound by all obligations and consequences arising from their agreement.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-12. The contractor is obliged to perform, on the instructions of the customer, certain work that is the subject of the agreement, and deliver its results with the established specifications within the agreed period of time, unless otherwise agreed by the parties.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-13. The contract indicates the price of the subject of the agreement, the date of delivery or acceptance of the results of work, the resources used (own or using components produced by other persons that existed before the conclusion of the agreement, unless otherwise provided by the contract).
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-14. Prior to the conclusion of the istisnaa agreement, all proposals for determining the price of the subject of the agreement are considered.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-15. The price of the subject matter of the agreement is determined at the time of conclusion of the agreement and may be paid in the form of cash or material assets, or usufruct from assets for a certain period, regardless of whether such usufruct is related to other assets other than the subject matter of the agreement, or whether it is related to the subject matter itself. contracts. The price can be paid on a deferred basis or in installments over a certain period of time, while in order to avoid uncertainty, the parties must, at the time of the conclusion of the agreement, choose and determine for themselves one of the payment methods. If the process of performing certain works under the istisnaa agreement consists of several stages or payment is determined on the basis of the staged completion of work, in this case the contractor has the right to require the customer to make payments as the stages of work are completed in accordance with the agreed specification.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-16. The price of Istisnaa agreement transactions may vary in accordance with the change in the date of delivery. The price of the subject matter of the istisnaa agreement cannot be determined on the basis of "cost plus a fixed profit". FCO uses information about the prices of suppliers that are competitive in the market to estimate costs and determine prospective profits.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-17. The istisnaa deal should not be a means for simple financing at interest.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-18. An istisnaa agreement may be concluded for the construction of real estate objects on a certain land plot, which belongs to the final buyer or contractor, or on land from the use of which each of them benefits.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-19. In the event of bankruptcy of the contractor/supplier, the customer has, under the istisnaa agreement, a priority right in relation to the unfinished object, subject to payment by the client of a part of the cost of the raw materials.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-20. The parties establish a period under the istisnaa agreement during which the contractor/supplier is liable for any defects or for the maintenance of the facility that is the subject of the agreement.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-21. The parties have the right, within the framework of the Istisnaa Agreement, if necessary, subject to mutual consent, to make changes and additions to the current Istisnaa Agreement, both in terms of previously agreed specifications and in terms of introducing additional requirements. However, the price must be adjusted accordingly and a reasonable period of time must be allowed to comply with the new requirements.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-22. It is not permitted to make changes to the Istisna contract in order to increase the price in exchange for granting a deferred payment. A discount for advance payment is allowed, provided that it was not agreed upon at the time of conclusion of the istisnaa agreement.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-23. In the event of unforeseen circumstances (force majeure), changes in the price may be made by agreement of the parties or in court.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-24. FCO can replace the contractor and enter into an istisnaa agreement with the customer to complete the project that was started with the previous contractor. In this case, the evaluation of the project should be done on the basis of the existing status of the project, at the expense of the customer. Also, the customer is personally responsible for all unpaid debts, if any, arise as a result of an unfinished istisnaa agreement. In the future, a new istisnaa agreement is concluded to carry out the remaining work.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-25. In the case of the construction of buildings or utilities on land owned by the customer, the istisnaa agreement may be carried out at the expense of the contractor if the latter does not fulfill the contract or cannot complete the work within the specified period of time, and this provision becomes effective from the moment the contractor stops work.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-26. If the contractor is unable to continue fulfilling his obligation, the customer (owner of the land) is not entitled to acquire ownership of unfinished construction or utility works that are already completed without providing compensation to the contractor. This condition depends on the reason why the contractor cannot continue the work.
If the contract is not performed due to the fault of the contractor, then the client can only receive the paid cost of the constructed structure, and the building contractor must compensate the final buyer for the amount of actual losses he has incurred.
If the failure to perform the contract is due to the wrongful actions of the customer, the contractor is entitled to receive an amount equal to the cost of the completed work and compensation for any loss or damage.
If the failure to fulfill the contract is due to reasons to which none of the parties to the contract is related, then the customer only pays the cost of the work performed by the contractor, otherwise the parties are not liable to each other for damage or loss.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-27. In the event of a change in legislation, if the consequences of these changes entail additional costs under the Istisnaa agreement, which cannot be imposed on the contractor by virtue of law, then the additional costs shall be borne by the customer.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-28. The FCO acting as a contractor or end purchaser may, as a guarantee, demand or pay money as a deposit, which forms part of the price, if the terms of the agreement are met. In the event that the istisnaa agreement is terminated, the deposit is withheld as a penalty, while the amount must be equal to the actual damage incurred.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-29. Under the Istisnaa Agreement, the FCO has the right to demand, whether acting as a contractor or a customer, such guarantees as it deems sufficient to protect its rights in relations with the customer or contractor. The FCO, acting as the customer, may give guarantees requested by the contractor, which may be in the form of a bond, assignment of rights.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-30. The FCO acting as the customer may appoint, with the consent of the contractor, a consulting firm with technical expertise to monitor, on behalf of the FCO, the compliance of the work performed with the agreed specifications, as well as provide recommendations regarding payment for the work performed, its delivery and acceptance.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-31. FCO, acting as a contractor, has the right to enter into a separate agency agreement, according to which the customer is appointed FCO's agent to control the manufacturing or construction process in order to ensure that the subject matter of the agreement complies with the agreed specifications.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-32. Additional costs for monitoring the execution of the Istisnaa agreement are paid by agreement of the parties.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-33. The contractor is released from the obligation under the istisnaa agreement if the subject of the agreement is transferred to the final buyer, if he is able to exercise full control over the subject of the agreement, or to a person appointed by the final buyer.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-34. If the condition of the subject of the agreement does not correspond to the agreed specifics of the order (project) on the date of delivery, then the customer has the right to refuse or accept it, which will mean satisfactory fulfillment of the agreement, with the possibility of changing the price.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-35. The customer is obliged to accept the delivered object of the agreement, unless there are sufficient grounds for its rejection. To refuse to accept the subject of the agreement, there must be a clear justification for the reason for this refusal.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-36. In the event of an unjustified refusal, the subject matter of the agreement remains in the possession of the contractor. In this case, the contractor shall not be liable for any loss or damage that may occur to the subject matter of the agreement, unless such loss or damage is the result of negligence or misconduct by the contractor. The customer bears the costs for the safety of the subject of the agreement.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-37. Delivery of the subject of the agreement is considered to be carried out from the moment of transfer to the actual possession (from the moment the parties sign the act of acceptance of the transfer) to the final buyer, which allows him to gain control over the subject of the agreement after the completion of the production process. At this stage, the contractor's obligation in relation to the subject matter of the agreement ends and the obligation of the final buyer begins. If, after the end buyer has been able to take control of the subject matter of the agreement, any loss or damage that subsequently occurs to the subject matter of the agreement, without evidence of negligence or misconduct on the part of the contractor, shall be borne by the end buyer.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-38. The contractor may act as the customer's agent in the sale of the subject matter of the agreement if there is a delay on the part of the customer in accepting the subject matter of the agreement within a specified period of time. In this case, the contractor sells the subject matter of the agreement on behalf of the customer and, after deducting the agreed contract price, returns the remaining funds, if any, to the customer. If the price received is less than the price stipulated by the contract, the contractor has the right to apply to the customer for reimbursement of the remaining part. In this case, the costs associated with the procedure for the sale of the subject of the agreement shall be borne by the customer.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-39. The customer bears the costs of selling the subject matter of the agreement.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-40. Penalties may be applied to the contractor of the subject of the agreement if the contractor violates the terms of delivery of the subject of the agreement, provided that the delay was not caused by unforeseen circumstances (force majeure). However, it is not permitted to provide for a penalty clause against the end customer for non-payment.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-41. It is not allowed to sell the subject of the agreement before it passes into the actual possession of the FCO, except as provided in paragraph 154-38.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-42. The FCO acting as the customer, after taking possession of the subject matter of the agreement, may appoint the contractor as an agent for the sale of the subject matter of the agreement to the customers of the FCO. In this case, the agency agreement between the FCO and the contractor is concluded separately from the istisnaa agreement.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-43. FKO has the right, under the contract, to order the manufacture of goods that have their own specification. Subsequently, FCO has the right, on the basis of the "parallel istisnaa" agreement, to conclude an agreement with the other party for the purpose of selling, already as a contractor or supplier of goods, the specification of which meets the requirements of the other party's agreement, and fulfill its contractual obligations accordingly. However, the delivery date stipulated in the parallel contract (sales contract) must not precede the date stipulated in the original purchase contract, and moreover, the two contracts must not be related to each other.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-44. The FCO acting as a contractor or supplier has the right to enter into an istisnaa agreement for the purpose of selling such goods to the customer on an installment basis and enter into a parallel istisnaa agreement on the basis of an immediate payment with the main contractor/supplier to purchase goods with the specifications provided for in the first contract and then sell them to the customer. In this case, the two contracts should not be related to each other.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-45. In the case of concluding an istisnaa agreement as a contractor or supplier, FCO assumes the obligation for property risk, maintenance costs and insurance for a period until the transfer of the subject of the agreement to the customer. FCO cannot, in a parallel istisnaa agreement concluded with a manufacturer/supplier, transfer to the latter responsibility for the risk arising from FCO's obligations towards the customer.
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
154-46. Contractual links between obligations under two agreements (istisnaa and parallel istisnaa agreements) are not allowed when they are concluded. Thus, it is not allowed for a party participating in an ordinary istisnaa agreement to waive its obligations or delay the transfer of the subject of the agreement, due to delays or non-fulfillment of obligations under the parallel istisnaa agreement, or to increase the price of the goods supplied due to an increase in the cost of goods under the parallel istisnaa agreement.
This does not limit the right of FCO to provide conditions and requirements when concluding a parallel istisnaa agreement, when FCO acts as a buyer, including a clause regarding penalties that is different or similar to the clause that the customer provided for in the first istisnaa agreement in which FCO acts as a supplier .
(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/10)
III. Final provisions
155. This Regulation may be supplemented with a list of operations that comply with the Islamic principles of banking and financing and provided for by Sharia standards approved by the Accounting and Auditing Organization for Islamic Financial Institutions, by making changes.
(1) Throughout the text of this Regulation for credit unions, the word client means a member of a credit union.
